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An interesting negotiation is taking place regarding the City of Glendale, Arizona’s attempt to keep the Phoenix Coyotes hockey team in Arizona.  The City had been negotiating a deal to help potential owner Matthew Hulsizer purchase the team from the National Hockey League (which acquired the team last year in a bankruptcy proceeding).  The City offered to sell $100 million worth of bonds and give Hulsizer the proceeds to help him purchase the team.  In return, the City would receive rent from the Coyotes for their use of the City-owned hockey arena and other fees.

The deal appeared done until the local non-profit Goldwater Institute threatened to sue, arguing it would cost the city more than the benefits received in violation of the Arizona Constitution.  This completely changed the negotiation dynamic by shifting the parties’ leverage.

Because the deal could be tied up for years in litigation if Hulsizer doesn’t agree to the Institute’s demands, his leverage weakened.  The NHL’s leverage also weakened because it is losing money as the current owner and would like to sell the team as soon as possible and avoid litigation.  While the City also would prefer to avoid litigation, it could attempt to use the Institute’s intervention to negotiate a more favorable deal, possibly using a good-cop/bad-cop approach.  As a result, its leverage has likely strengthened.

The Institute’s leverage also appears strong because in response to its demands, Hulsizer said he would pay the City $25 million to reimburse it for losses it already incurred and to guarantee $75 million of the bonds.  The Goldwater Institute rejected his offer and asked him to either drop his request for $100 million from the city or guarantee full repayment of the bonds.  We await the next move.

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